The real winners at Bali

At the ninth ministerial meeting at Bali in Indonesia, trade Ministers, representing the 159 members of the World Trade Organization (WTO), managed to reach an agreement in the wee hours of December 6. The fact that an agreement was possible at all is seen to be as significant as the issues on which a consensus was reached. This is because the WTO and the Doha round, in particular, needed a booster shot as it were to retain their relevance.

Days before the Bali meet, discussions, among trade officials, were leading to nowhere. It was widely feared that the Bali ministerial would go the way of all its predecessors.

The Doha development round was launched way back in 2001, soon after the terrorist attack in the U.S. in a bold move to infuse confidence in world trade. Yet, several ministerials, attended by political leaders and countless negotiations involving officials at the WTO headquarters at Geneva and elsewhere, failed to produce a single agreement during the 12-long years.

So much so, the feeling was universal that the Doha round had slipped into irrelevance. Its moribund state called into question the very basis of multilateral trade that the WTO has been propagating.

A dwindling faith in multilateralism has spawned several moves to bypass the WTO. Thus, as member-countries started reposing faith in bilateral agreements among countries and regional pacts to reap short-term gains, world trade was getting ‘balkanised’, making the eventual move towards multilateral trade that much more difficult. India and other developing countries, even while actively pursuing the bilateral route and regional pacts, had every reason to worry over the long-term consequences of the drift away from multilateral trade.

In many ways, the Bali agreement was driven by a fear that the big emerging economies would be left out of two giant trade pacts in the offing. Specifically, the U.S. and the EU have launched negotiations to conclude a trans-atlantic trade agreement. Japan and ten other Pacific Rim countries are getting close to finalising a Trans-Pacific Partnership. India, Indonesia, Brazil and Russia, which are unlikely to figure in the above pacts, see in a revived WTO their best hope for having a voice in global trade.

To the WTO’s rescue

The role of the new WTO Secretary-General, Roberto Azevedo, has been very significant. In fact, many commentators say he is the real star of the Bali meet. There were apprehensions that a career diplomat from Brazil, a developing country, would not quite fit the bill. Neither the E.U. nor the U.S. had backed his candidature unequivocally. In these circumstances, Mr. Azevedo pulled off a deal, which, under WTO rules, requires unanimous support from all members.

A revived WTO is good for all countries. Its success in years to come will depend how the more intractable parts of the Doha round are taken care of.

The Bali Declaration has major implications for India and other developing countries. Of the two main issues — food security and trade facilitation — on which the agreement was reached, the former concerns India and other developing countries, which need to subsidise food for the poor, while the latter is significant for developed and developing countries. India, represented by Commerce Minister Anand Sharma, has claimed victory for holding out and eventually securing important concessions in food subsidy.

The core discussions on agriculture centred on two viewpoints on the price benchmark for the valuation of food stocks that a country can legally hold. India wanted current prices to be the basis, but that was not acceptable to the U.S. and many others.

Among other reasons, it would involve amending the Uruguay Round agreements. India, as an alternative, proposed an interim solution.

The U.S. suggestion for a sunset clause of four years was not acceptable to India. A final deal was struck to have an interim agreement until a more permanent arrangement was worked out. So, obviously, many more rounds of discussions are on the cards.

The interim nature of the agreement is just one of the reasons that diminish the gloss from India’s ‘victory’.